December 23, 2005 Abstract We consider first-best risk-sharing problems in which “the agent” can control both the drift (effort choice) and the volatility of the underlying process (project selection). In a model of delegated portfolio management, it is optimal to compensate the manager with an option-type payoff, where the functional form of the option is obtained as a solution to an ordinary ...

We study the effects of granting an exit option allowing private party to terminate a Public–Private Partnerships contract early if it turns out be loss-making. In continuous-time setting with hidden information about returns on investment, we show that option, acting as risk-sharing device, can soften agency problems and, in so doing, spur investment and increase government's expected payoff, ...

We examine the optimal concession contract for an infrastructure that generates both user fee revenue and ancillary commercial revenue. For example, airports charge user fees to passengers and airlines (aviation revenue) and collect revenue from shops, restaurants, parking lots and hotels (non-aviation revenue). While passenger flow and the demand for the infrastructure are exogenous, the deman...

The allocation of risks among the contracting parties in a contract is an important decision affecting the project success. Some risks in a project are uncontrollable; these are imposed to a project by external factors. Since contracting parties can neither control nor affect the occurrence of such risks, their allocation to a party would be inequitable. Therefore the cost overrun related to un...

This paper studies a dual-channel supply chain composed of retailer and supplier, discusses the optimal decisions participants under decentralized decision-making without with demand disruption, respectively. By comparing in two scenarios, we find that decision after disruption is linear function plus before disruption. Additionally, when interval (? ?u 2 , 1 ), total production equal Moreover,...